Published on April 1,2016,NYC
We’ve all been there. It’s the first day of your new job, and someone hands you a stack of forms to fill out. You need to make all kinds of important insurance and benefit choices right now, so how in the world do you know which choices to make?
Increasingly complex plans can leave you unsure of how to navigate through your options. How do you know you are making the best decisions for you?
The Big Choice:
Usually, you will have to decide which funds you want the money to be put into. Remember, you can go back and change this later if you decide on a different strategy. If you really do not understand mutual funds and the choices offered, check to see if there is a fund based on your life stage or age.
One example of this is target-date funds (also known as life-cycle funds). These are mutual funds that adjust risk as you age and require little on your part in terms of adjustments. If you are younger, you can handle more risk because over time the market will balance out in your favor.
Health Insurance Choices.
You may have to choose between a Health Maintenance Organization (HMO) and a Preferred Provider Option (PPO) for medical insurance. An HMO allows you to go to doctors that are contracted with a specific insurance company. If you have a specific doctor you really like to use, ask to see the list of doctors on that plan, or go to the HMO website to find a list of its providers.
“Your financial advisors can also be a tremendous resource as you work through these benefits elections.”
Life and Disability Insurance
Life insurance is meant to reimburse the beneficiary for lost wages and income. If you are single and not supporting anyone else, you may not require life insurance. If you have a family to support, you need to think about how much they would need to survive in the event of your death. Disability insurance, on the other hand, may be more important for you personally regardless of marital status. If you were to become disabled, you would receive a payout in place of income.
Disability income insurance
One of the most overlooked insurance benefits tends to be income protection, or disability insurance. Most would agree that not having a regular paycheck would drastically change many families’ lifestyles.
However, the amount of time and emphasis most employees and employers spend on this benefit is lacking. Disability is a statistically “more likely” event than death during your working years.This fact seems to be forgotten during the annual benefits enrollment process.
The Bottom Line
Many people make mistakes and choose inappropriate choices when filling out their benefits forms. Fortunately, you can still go back and make changes down the road. Younger employees may not require nearly as many insurance choices as an older employee. Younger employees also have a great opportunity to have a substantial retirement nest egg. The employee in his or her mid-20s who puts away between $3,000-$4,000 a year could have more than $1 million upon retirement. The key to doing the right thing is to start young, take out as much as you can before you notice it is missing and keep an eye on your choices to be sure you are adjusting them as your conditions change.
A keen understanding of those facts will help lead you to make the right choices. Your financial advisors can also be a tremendous resource as you work through these benefits elections.
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